Economic Integration in Africa Amid the COVID-19 Pandemic

Economic Integration in Africa Amid The COVID-19 Pandemic

Introduction

Declared a pandemic by the World Health Organisation on March 11, 2020 (ALJAZEERA, 2020), Covid-19 has become a global emergency given its impact on the entire world population. As of 19th May 2020, there were 4.87M confirmed cases and over 400,000 reported deaths (BBC, 2020). The multiplier effects of this pandemic reflects on the world economy, as scenario simulations by the International Monetary Fund (IMF) indicate that global growth could fall by 0.5% for the year 2020—an indicator that global economy may enter a recession at least in the first half of this year (Trade Law Center (tralac), 2020). Relatively, the progression of the pandemic in Africa is seemingly low in comparison to other continents, but, African economies are not immunised from the impact of the COVID-19 pandemic. African economies remain informal, extroverted, and vulnerable to external shocks. Hence, the rapidly evolving nature of the pandemic globally presents visible slowdowns in lifeline sectors of African economies such as: tourism, air transport, and the oil industry; with more projected impacts in 2020 and beyond regardless of the duration of the pandemic.

The task under consideration is on economic integration in Africa amid the COVID-19 pandemic. I contend that economic integration is attainable and pertinent in Africa amid the COVID-19 pandemic. This is because, economic integration will help mitigate the effects on African economies while making it a key player in global developments. I base my position on the premise that even if African countries are relatively less affected compared to other regions, the spill over effects from global developments may still lead to faltering economic activity. In addition to the fact that it is practically impossible at the moment for the continent to take an economic advantage of the wide spread of the virus in other parts of the world; primarily due to its inability to transform raw materials to respond to the potential demand of goods and services of the domestic and international markets (Trade Law Center (tralac), 2020). To prove these points, I first endeavour to chart a brief conceptualisation of the term ‘economic integration' and then also present a brief overview of African economies hitherto the pandemic and its aftermath projection. I then progress to present how economic integration may help mitigate the adverse economic effects, as well as how the pandemic and measures taken by African governments can hinder economic integration on the one hand. Finally, I draw my conclusions, and suggest a way forward. Also, I centre my discussions on economic integration exclusively on the African Continental Free Trade Area (AfCFTA), precisely because the continent was at a critical phase in the implementation of this trade agreement.

What is Economic Integration and how can it be attained in Africa amid the pandemic?

In the economic literature the term “economic integration” has no clear-cut meaning (Balassa, 1991). However, judging from two extremes, the term may be conceptualised as either a ‘process', or a ‘state of affair'. Firstly, it is a process in the sense that it is designed to encompass measures which eliminate discrimination between economic units that belong to different national states. Or, viewed as a state of affair because, it represents the absence of various forms of discrimination between national economies (Balassa, 1991). In sum, economic integration means the unification of economic policies, resulting in the establishment of supranational authority whose decisions are binding for member states. These integrations may take varied forms including elimination of trade tariffs among member states; suppression of intra-area trade barriers; equalising tariffs on imports from non-member countries, among others. A real-world example of economic integration is the European Union which was created in 1993, and accounts for close to 16.04% of the world's gross domestic product (Keaton, 2020).

Moving on, hitherto COVID-19, Africa's baseline growth was pegged at a rate of 3.4% (Trade Law Center (tralac), 2020) which represented a steady rise across a ten year period (2010­2020). However, due to disruptions of the global value chain, sharp falls in commodity prices and fiscal revenues, and the imposition of travel bans, there is now an estimated negative economic growth rate of -0.8% (ibid, 2020). Revenue accrued from exports and imports in Africa are projected to drop by at least 35% which represents an estimated loss in value of 270 billion US dollars. Nonetheless, these trying times and negative projections present a strong case for economic integration. As it will help mitigate the negative growth projections whiles making African economies key in global developments. Compared to other regions of the world, intra-African trade is one of the lowest, at 16.6%. Low levels of industrialisation, infrastructure development, financial and monetary integration, and tariff and non-tariff barriers account for this situation. These factors make African economies extroverted, and sensitive when exposed to external shocks and decisions such as those presented by the pandemic. At the core of these trajectories lies the AfCFTA which seeks to integrate African economies by requiring member states to remove tariffs from 90% of goods, allowing free access to commodities, goods, and services across the continent (The Economist, 2018). The AfCFTA which is an agreement among 54 of the 55 African Union member states, will be the largest free trade agreement in the world in terms of membership since the formation of the World Trade Organisation (African Union, 2018; Crabtree, 2018). Amid the COVID-19 pandemic, the AfCFTA provides a concrete and timely mechanism to realise Africa's economic futures (Food and Agriculture Organization of the United Nations , 2020). I tackle these mechanisms briefly under two key pathways which include: pharmaceuticals and food imports.

On pharmaceuticals, annually, the continent spends an estimated 16 billion USD on drugs which are imported largely from Asia and Europe. However, taking into consideration how pharmaceutical industries in these export countries are affected by the pandemic, now presents a good time for the continent to start manufacturing drugs which will not only be cheaper, but also help secure the quality and safety of supplies, contribute to financial sustainability as import bills are increaing across the continent (Trade Law Center (tralac), 2020). More so, local production of pharmaceuticals across mandated hubs can support intra/inter-regional trade for mutual economic benefits and support local investments. In sum, the AfCFTA will create a conducive environment and springboard for nurturing African multinationals and creating jobs for posterity (Trade Law Center (tralac), 2020).

Futhermore, over a dozen African countries are net exporters of food, but they largely do not sell within the continent. Many African countries also import foodstuff such as grain, fish, meat and dairy products from the Middle East, Europe, and Asia. Economic integration which will be propelled by the AfCFTA will cushion against external shocks on the commodity market, and help build Africa's long term resilience against economic volatility and food shortages.

In as much as economic integration will set Africa on a brighter path, some policies undertaken by various African governments in the face of the pandemic may hinder the attainment of economic integration. For instance, the imposition of blanket import restrictions—many countries in Africa have imposed restrictions as part of border closures to manage the disease outbreak. However, as many countries are import-dependent, it is important to establish safe trade and travel corridors according to WHO guidelines, to minimize the impacts of COVID­related disruptions and keep food supply chains alive (Food and Agriculture Organization of the United Nations , 2020).

Closely related to the point above, is the adoption of ad hoc export restrictions: In the past, countries have responded to market uncertainties by imposing export restrictions. While such measures can increase domestic food supply and help control domestic prices in the short term, low and volatile prices and an uncertain policy environment can create disincentives for producers to invest in the long run. Finally, they can be particularly damaging to poor-import dependent countries within the continent, particularly if similar measures are taken by a number of countries at the same time (Food and Agriculture Organization of the United Nations , 2020).

Conclusion and Recommendations

So far, this paper has presented in brief, what economic integration means in Africa amid the pandemic, by focusing exclusively on the AfCFTA. By way of suggestions for the future, according to insights gathered from the few consulted materials, the acceleration of the trade agreement is above all a matter of political will considering how disintegrated the continent is. Going forward, concerted efforts to integrate the continent will serve as a catalyst for this development. However, it is beyond the mandate of this paper to go into the political complexities that surround economic integration amid the pandemic, hence, it remains a suggestion for future researches. (AUDA-NEPAD, 2020).

In conclusion, the AfCFTA paves the way for Africa, with 1.2 billon people and a cumulative GDP of 2.5 trillion—to become the world's largest common market. But with the COVID-19 pandemic, hitting the global economy, a worldwide recession is looming. The crisis is bound to have destabilising effects on our fragile economies as the health crises worsens (AUDA- NEPAD, 2020). A looming global recession is bound to destabilise African economies, and cause a structural transformation in trade, commercial channels, work, and even borrowing. Under these contexts, Africa will have no choice than to depend on its own expertise and technologies to build economic resilience. This resilience building can only be made possible when economies on the continent shift from the matrix of an over reliance on the exportation of raw materials and commodities whose value are extremly dependent on external decisions, and focus more on the implementation of trade mobility and industrilisation across the continent.

It is therefore in such contexts marked by shifting webs of relations and events in local, regional, and global spheres that Economic integration in Africa amid the COVID-19 pandemic by way of the AfCFTA, will go a long way in hastening the recovery from COVID-19 impacts, as well as cushion economies on the continent against future shocks.

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